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IRS actions sets ‘dangerous precedent’ for bitcoin companies: US Congress on IRS-Coinbase dispute
The members of the U.S. Congress have issued a letter to the Internal Revenue Service (IRS) on the agency’s ongoing tussle with digital currency exchange Coinbase.
The IRS last year issued a John Doe summons to Coinbase requiring it to hand over the records of all its U.S.-based customers who conducted digital currency transactions between 2013 and 2015. The Senate Committee on Finance and the House Committee on Ways and Means noted that the agency issued the summons despite a lack of a comprehensive digital currency tax strategy.
“The summons is estimated to affect 500,000 active Coinbase customers and would result in the production of millions of pages of associated records, many of which contain personally identifiable information. However, 90 percent of these customers engaged in less than $10,000 in cumulative, gross transactions during the entire period requested”, the Committee added.
In an affidavit, IRS agent David Utzke stated in March that only a small number of users declare their profits or losses resulting from bitcoin or digital currency transactions in their yearly tax returns. The IRS in its investigation found that in 2013, 807 individuals reported a transaction on Form 8949 using a property description likely related to bitcoin; in 2014 and 2015, 893 and 802 individuals reported a transaction related to bitcoin respectively.
The Committee went on to say that the actions of the IRS, in this case, set a “dangerous precedent” for companies facilitating virtual currency transactions that could be subject to a similar summons.
“[W]e strongly question whether the IRS has actually established a reasonable basis to support the mass production of records for half of a million people, the vast majority of whom appear to not be conducting the volume of transactions needed to report them to the IRS. Based on the information before us, this summons seems overly broad, extremely burdensome, and highly intrusive to a large population of individuals”, it added.
In an update on the matter, Coinbase in March stated that it has not produced any records to the IRS under the summons. It said at the time that it will continue to work with the agency to assess the government’s willingness to fundamentally reconsider the focus and scope of the summons.